• Eligible customers may shrink as NERC emplaces stringent conditions
• NERC faces litmus test; fresh metering unsettles investors, eight million households
• Metering companies may sink, merge over possible recapitalisation
• N50b Meter Acquisition Fund to provide collateral for viable companies
About two million households, representing 15 per cent of the 13 million electricity customers in Nigeria, are set to bear the burden of an inefficient power sector as the Nigerian Electricity Regulatory Commission (NERC), yesterday, increased the electricity tariff of a newly computed band A customers from an average N70 to N225 for every kilowatt per hour (kWh).
Coming as one of the highest single tariff increases in the history of electricity rate adjustment in the country, NERC, through an April 2024 Supplementary Order, based its decision on rising gas prices, inflation, and foreign exchange rates.
This comes amid indications that the price of prepaid meters may skyrocket to above N300,000 as manufacturers and NERC push for a liberalised market. Already, the manufacturers have approached NERC and applied for a review of the current meter rate.
NERC has also released a new revised Eligible Customers Order, which heightened the conditions under which end-users would qualify under the policy from the previous two megawatts to between 6MW and 20MW.
This is a development that would drastically shrink the number of customers under the Eligible Customers policy. Previously, all that was required for eligibility was for customers to consume up to 2MWh/h and more electricity over one month. Now, they must have consumed or have a planned consumption of not less than 6MWh/h to 20Wh/h over 90 days (three months).
Vice Chairman of NERC, Musiliu Oseni, said the commission downgraded the over 900 feeders classified as band A by distribution companies for failing to meet the requirements and has approved only less than 500 feeders.
This development is coming at a time when the grid, which NERC and the distribution companies (DisCos) have limited control over, is failing repeatedly; and at such a time when Aggregate Technical Commercial and Collection losses of the DisCos stand at about 41 per cent.
Indeed, electricity generation has plummeted to about 3,000 megawatts as most households and industries are in darkness. For industries and homes, the cost of energy has more than tripled and sparked inflation, with the cost of food items and goods soaring above the roof.
NERC had created a tariff bank spanning from A – E. The major difference across the tariff is the hours of supply. For those under band A, they are to enjoy electricity for at least 20 hours per day. Downgrading almost 50 per cent of the band A customers meant that DisCos had for over two years deceived the commission and must have wrongly charged consumers for hours of electricity they never enjoyed.
Oseni noted that the about 500 feeders represented 15 per cent of customers, adding that only the 15 per cent would be affected by tariff increase.
Earlier in the week, the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) had adjusted price of natural gas for the power sector from $2.18 to $2.42 by an additional $0.5. Between January and now, when NERC announced a now abandoned Multi-Year Tariff Order (MYTO), inflation has slightly increased while the exchange rate moved from about N100/$ to over N1,300/$.
In the past, NERC had a separate tariff structure for each DisCo. But in the current situation, it fixed a uniform rate for all the DisCos, irrespective of their operating challenges and other metrics. Justifying the decision, Musiliu said the current method was fair; adding that there was a level of subsidy on the old band A, which has now been removed.
In what appeared like punishment for the tariff increase halted since July last year by President Bola Tinubu or a robbing Peter to pay Paul, the new move is part of decisions by the Tinubu government to end electricity subsidy by making band A bear the burden.
In the past 10 years, subsidy payments have climbed by over N5.4 trillion. Suspended without a feasible plan to pay the shortfall, the Tinubu administration has already accumulated almost N1 trillion in electricity shortfall and now has to use band A customers to ease the burden.
Musiliu disclosed that over 80 per cent of the Band A customers are already metered and that the current metering exercise would prioritise bridging the gap for the 15 per cent of customers affected by the tariff hike.
MEANWHILE, a proposed metering initiative, aiming to address Nigeria’s eight million metering gap will subject NERC to a litmus test 10 years after elusive metering regulations, even as some meter companies may need to recapitalise, merge, or sink.
While NERC had, in 2018, licenced 101 companies and later, in 2020, cut down the number to 23, there are indications that a new recapitalisation would be introduced by the commission as most of the current metering companies have no financial and technical backing to overturn the metering gap.
Under the new plan, currently being fine-tuned by a committee at the commission, eight million households may face the burden of procuring prepaid meters themselves at a higher price as market reality, especially foreign exchange and inflation would determine pricing and remove NERC as the primary price setter.
The Minister of Power, Adelabu Adebayo, had, last week, hinted that metering would be liberalized.
Sources at the commissions told The Guardian that a Meter Acquisition Fund, about 0.75 per cent charged on the over 13 million end-user tariffs in the country, now stands at about N25 billion. There are expectations that the fund would hit about N55 billion in the 2024 tariff.
After recapitalising the companies, the metering fund is expected to be used by NERC as collateral or a guarantee for the metering segment of the market .
Coming amid a series of corruption allegations against metering companies in Nigeria, including the N40 billion contract recently awarded by Adebayo to meter military formation across the country, some metering companies, yesterday, expressed fear that recapitalisation may spell doom.
While Nigeria has about 13.2 million registered electricity customers, only 5.8 million have been metered, even when metering remains a key performance indicator for distribution companies.
For over 10 years, about 8 million customers were billed arbitrarily, a development which usually shortchanged not only consumers but worsened the liquidity crisis in the power sector.
This necessitated over N5.4 trillion tariff shortfall and pushed the indebtedness of the power sector to the Central Bank of Nigeria (CBN) and commercial banks to record high.
After privatisation, Nigeria introduced Credited Advance Payment for Metering Implementation (CAPMI) in 2013 but the scheme was closed in 2016 as only 500,000 meters were deployed in the four years of the programme, while distribution companies were unable to meter customers after payment. NERC later introduced the Meter Asset Provider (MAP) Regulation (Regulation No. NERC/R/112) with effect from April 3, 2018.
But the initiative did not also live up to expectations as the Federal Government introduced the Mass Metering Programme which overshadowed the MAP initiative. Under the mass metering programme, while about 900,000 meters were said to be provided under the zero phase of the scheme, there were a series of corruption issues that forced the CBN to charge most of the metering companies to court. The World Bank had agreed to fund the deployment of 1.2 million meters, but the scheme is yet to see the light of the day.
Some stakeholders believe the Federal Government and NERC were not supposed to have roped themselves in metering. They insisted that the inability to resolve the metering issues over the years created a liquidity crisis in the power sector and put a lot of Nigerians under the burden of estimated billing.
A meter manufacturer, speaking on the condition of anonymity, told The Guardian that NERC had engaged with the metering companies and the option of liberalisation of meters was being considered.
He said NERC has told metering stakeholders that MAPs would determine the price of meters while the regulator would only play the monitoring role and stop profiteering.
He expressed concerns over the planned recapitalisation, noting that a lot of companies could be disenfranchised. He advised different layers of capitalisation just like it is being done by the CBN.
Professor of Petroleum Economics and Policy Research, Wunmi Iledare, said while NERC may be thinking outside the box with the metering issue, allowing meters to be bought anywhere on the shelves should not be an option because “metering standards can easily be compromised.”
On passing the burden on consumers, Iledare opposed the idea and said it remained the responsibility of the sellers of electricity to properly and accurately measure the quantity of power consumed by consumers.
“NERC needs to designate estimated billing as an unethical business practice,” Iledare said.
Energy consultant, Dan D. Kunle, said the metering of households was not expected to involve the Federal Government.
According to him, since the government did not help to buy telephone handsets, air-conditioning for households, or gas cookers and refrigerators, the procurement of meters should not have been a complicated issue.
“How did the Federal Government allow itself to be distracted by the issue of meters? The power sector value chain management is by far more enormous than just meters. Transmission is a big headache; gas production and supplies are big enough for the government. Distribution transformers are big issues,” he said.
A stakeholder in the sector, Adetayo Adegbemle, said the country’s macroeconomic indices do not encourage stable pricing for materials that are sourced in foreign exchange.
According to him, the development encourages liberalisation, adding that NERC is looking at the issue from that angle. “Liberalisation, for me, is a good move, although the devil is in the finer details,” he said.
Former President of the Chartered Institute of Bankers of Nigeria (CIBN) and Professor of Economics at Babcock University, Segun Ajibola, lamented that metering remains one of the Achilles heels in the electricity chain in Nigeria.
Ajibola said: “Prepaid metering should ordinarily be available by the asking. But it has become a mafia in content and context between electricity companies and their regulators on the one hand, and the helpless and hapless Nigerians who are the consumers on the other hand.”
The new initiative to remove this clog, according to him, remains a welcome development as he expressed support for the idea of liberalising the supply of prepaid meters to needy consumers.
He said any funding support by the Federal Government for the meter suppliers must change the current unsavoury narrative.
THEGUARDIAN
